Can You Save For Retirement Without A 401(k)?

Brandon R. Amaral, CFP®, EA
Brandon R. Amaral, CFP®, EA

Founder & Financial Planner, Amaral Financial Planning

Sure, 401(k)s are known as the Holy Grail of saving for retirement, but they are by no means the only way. For some people, 401(k)s might not even be available to them. This can include:

  • Self-employed individuals
  • Employees of small businesses
  • Unemployed or disabled people

Just because you don’t have access to a traditional 401(k) doesn’t mean that you aren’t able to save for retirement. Everyone’s situation is unique and will have different choices based on their age, income, and goals.

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Here is an overview of alternative ways to save for retirement:

Create a SEP IRA or Individual 401(k)

For self-employed individuals, ranging from Mary Kay sales to residential landscapers to real estate agents, these are options for you:

A SEP IRA is a Simplified Employee Pension Individual Retirement Account. While this might sound complicated, it is actually one of the simplest retirement plans for a self-employed person to set up and contribute to. These accounts can be opened and funded up until the tax-filing deadline, INCLUDING extensions.

An Individual 401(k) is more complex and has stricter rules, but typically allows higher contribution limits than a SEP IRA. Individual 401(k) plans are only eligible to businesses without employees (other than the owner or the spouse). These accounts allow business owners to make contributions as both the employer AND the employee, up to $61,000 in 2022.

Open a Traditional IRA or Roth IRA

Employees who don’t have access to a retirement plan at work can open their own IRA or Individual Retirement Account.

A Traditional IRA can accept either pre-tax or post-tax contributions but is usually funded with pre-tax dollars. Employees can contribute up to $6,000 in one year and deduct it from their taxes, which can help reduce their tax bill. Similar to a 401(k), taxes are generated when funds are withdrawn in retirement.

While similar, a Roth IRA can only accept post-tax contributions. This means that employees will not be able to deduct their contributions from their taxes. The benefit of a Roth IRA, however, is that no taxes are generated on withdrawals in retirement.

Save in taxable cash or investment accounts

Individuals who do not receive taxable income, such as wages or self-employment income, are not eligible to contribute to an IRA or other retirement account.

There are still ways to save using a normal bank or brokerage account. With these accounts, there is no maximum to how much can be saved in a given year. However, there are no tax-deferred or tax-free benefits as with 401(k)s and IRAs. While this option is not typically ideal for most people, it is better than not saving any money at all.

Understanding all of your options when it comes to saving for retirement is an essential part of your financial plan. If you would like to work with a financial planner to walk you through your options, I would love to help you!

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Disclaimer: This blog is for informational purposes only, and should not be considered advice or recommendations. All opinions expressed herein are solely those of Amaral Financial Planning, LLC, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made to another parties’ informational accuracy or completeness. You should consult your financial advisor, tax professional or legal counsel prior to implementation.